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Advisory
- Date
- 24 May 2023
- Advisory Number
- 23-023
- Distribution
- Real Estate Professionals
Purpose
BC Financial Services Authority (“BCFSA”) is issuing this Advisory to inform real estate licensees of a new Rule from the Insurance Council of British Columbia (“Insurance Council”) that addresses potential conflicts of interest between licensed insurance agencies and strata managers in relation to strata corporation insurance. The Rule comes into effect on July 1, 2023.
Background
The Insurance Council is introducing a new Rule (7(11.2)) that will prohibit insurance licensees from conducting strata insurance business for strata corporations that are managed by an insurance licensee’s affiliated property management company (e.g., strata management brokerage).
Going forward, real estate licensees and brokerages that are licensed to provide strata management services need to be aware that when there is common ownership between the insurance licensee and the brokerage providing strata management services to a strata corporation, the insurance licensee cannot engage in insurance business for that strata corporation.
The Insurance Council is establishing this Rule to address potential conflicts of interest where insurance agencies and firms affiliated with property management companies could refer strata insurance business to one of their subsidiaries, rather than an insurance provider that better meets the client’s best interests.
Strata property managers should inform their strata council clients of these upcoming changes and may wish to seek instructions from affected clients about the placement of strata insurance policies, including:
- Obtaining and reviewing quotes; and
- Planning for operational impacts for the strata corporation (e.g., in relation to premiums or coverage).
Where an insurance licensee is required to terminate business with a client, the insurance licensee must provide adequate notice of their intent to withdraw services.
The Insurance Council’s new Rule builds on the 2020 amendments to the Financial Institutions Act, which prohibit the payment of referral fees to strata managers for the sale or renewal of strata property insurance.
Additional Information
To learn more about this new Rule, please refer to the following Insurance Council resources: